Does Fine M-TecLTD (KOSDAQ:441270) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Fine M-Tec CO.,LTD. (KOSDAQ:441270) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Fine M-TecLTD's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Fine M-TecLTD had ₩124.6b of debt, an increase on ₩82.7b, over one year. On the flip side, it has ₩15.8b in cash leading to net debt of about ₩108.8b.

How Healthy Is Fine M-TecLTD's Balance Sheet?

According to the last reported balance sheet, Fine M-TecLTD had liabilities of ₩126.3b due within 12 months, and liabilities of ₩58.2b due beyond 12 months. On the other hand, it had cash of ₩15.8b and ₩35.9b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩132.9b.

This deficit isn't so bad because Fine M-TecLTD is worth ₩264.0b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Fine M-TecLTD will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for Fine M-TecLTD

In the last year Fine M-TecLTD had a loss before interest and tax, and actually shrunk its revenue by 11%, to ₩356b. That's not what we would hope to see.

Caveat Emptor

Not only did Fine M-TecLTD's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at ₩12b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₩56b of cash over the last year. So in short it's a really risky stock. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 3 warning signs for Fine M-TecLTD (2 are potentially serious!) that you should be aware of before investing here.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.